The Ontario government is planning to retroactively ban a kind of lien that's increasingly being used in fraud against homeowners from the land registry system, the minister responsible for consumer protection told The Trillium on Tuesday.
The scam generally begins with a homeowner's purchase of a new appliance, such as a furnace or water heater. In other cases, it's something as simple as a doorbell camera, Minister of Public and Business Service Delivery Todd McCarthy said Tuesday.
It may seem like a deal because the homeowner doesn't have to pay for it outright, but there's a catch: the company places a Notice of Security Interest, or “NOSI," on their title, often without their knowledge, thanks to the fine print in an exploitative contract.
When it comes time to sell or refinance their property, some homeowners are surprised to find the NOSI — or multiple NOSIs — on the title. In many cases, they must be discharged before they can close the deal. Abusive and even fraudulent NOSIs are difficult and time-consuming to fight, and many homeowners, under time pressure to close, pay up — for thousands more than the appliance was ever worth, thanks to high-interest rates charged by the company.
"It's literally like a virtual home invasion because, after all that you've saved to pay off your mortgage, you're now stuck with this high-interest NOSI that you need to hire your own lawyer to get rid of," McCarthy said.
NOSIs alert potential homebuyers that fixtures in a home are leased by the homeowner — and the lender can remove and sell the fixture if the homeowner defaults on their lease. It's not yet clear what other measures McCarthy's bill may include to address NOSIs' legitimate purpose or the exploitative contracts that lead to their misuse.
But McCarthy said the government cannot distinguish between the traditional use of a NOSI and the "improper, fraudulent, criminal use" of the tool commonly seen today, and so the government is planning to remove NOSIs from the land registry system altogether.
"We need to go for outright abolition, eradication, a ban across the board and make it retroactive," he said. "That's what we aim to do, so I will be tabling legislation this spring to do just that."
By making the change retroactive, homeowners will be spared from having to hire their own lawyers to fight abusive NOSIs on their titles, said McCarthy.
"We're gonna have the backs of Ontarians, and seniors in particular, on this."
This fall, the minister responsible for consumer protection in Ontario launched a public consultation on NOSI abuse and fraud. In December, the government passed a bill that includes a preliminary step — clarifying businesses' obligations to discharge NOSIs when a contract is up — that McCarthy said at the time could allow for the prosecution of bad actors.
He said then that the government intends to do more in the future.
But the opposition NDP wanted the government to move faster and on Tuesday tabled a private members' bill that would ban NOSIs and wipe out existing NOSIs.
Linda Palmieri, a Toronto resident who spoke at Queen's Park Tuesday in support of the NDP bill, said her in-laws had 12 NOSIs registered to the title of their home.
She said it began when they signed a contract for a furnace and air conditioner unit that they thought was with a reputable company that the government had recommended. The fine print of the contract allowed the company to register a NOSI on their title.
Palmieri said doing so also "put them onto a fraud list, in which their names and identities have been swapped, sold, and essentially trafficked out to other fraudulent companies."
"This has gone on for six years," she said.
"They are fighting out of pocket to get those (NOSIs) and those companies off their mortgage and to secure their home," she said. "They are a shadow of themselves, unable to sleep, eat."
Lawyers with the Advocacy Centre for the Elderly, a non-profit legal clinic, said they receive hundreds of calls a year about NOSIs.
"We have clients where the same company is registered three NOSIs for the same product, such as a furnace," said lawyer Bethanie Pascutto at the NDP press conference. "And unfortunately, now, unless the company or person who registered the NOSI agrees to remove it, the only avenue to remove it is through litigation, which for these low-income seniors, is prohibitively expensive and time-consuming."
McCarthy said his bill stemmed from consultations with seniors and other consumers, law enforcement, lawyers, and consumer advocates.
He said that while a NOSI isn't technically a lien, it's essentially equivalent to one as it's registered against property, which is what the government intends to change.
He told the house in December that the government was aware of more cases where "unscrupulous participants in the marketplace... pressure vulnerable Ontarians into high-interest short-term mortgages with less-than-reputable lenders, to pay out the NOSI and extract more money through mortgages."
He called it a "hideous practice" that particularly harms senior citizens.
"There have been cases where homeowners have lost their homes entirely because of mortgage defaults, or they’ve made a large cash payment because of NOSIs that were leveraged inappropriately by the unscrupulous," he said at the time.
